James Dean Got it Right

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.

In the classic "Rebel Without a Cause," our teenage hero agrees to a "chickie run" where he and Buzz the bully race toward a cliff in stolen cars to see who will bail out last. Unfortunately for Buzz, an entanglement of his jacket sleeve on the car door ends his short, tyrannical life.

A similar drama is playing out today in Washington as the U.S. economy speeds toward the "fiscal cliff" that could be reached on New Year's Day. As revelers awake to face lucky '13, they may find:

Bush and payroll tax cut expirations

Dramatic healthcare tax increases

Sizable spending cuts from the failed "Super Committee"

Ending of extended unemployment benefits

Taken together, there will be $500 - 700 billion in fiscal contraction - or about 3 to 5 percent of GDP. Considering the economy continues to teeter, a 5 percent adjustment feels like a cliff, indeed.

Republicans and democrats have created this cliff through prior legislative bargains, forcing a showdown of sorts heading into the election this fall. The question is: who will bail out first?

Just like the movie, neither side wishes to fly over the cliff, but both are looking for gains (political in today's case, bragging rights in the celluloid version).

Briefly stepping through election scenarios:

A sweep by either democrats or republicans will see action move quickly toward lessening the depth of the cliff by adjusting many of its elements quickly

A split (however you cut it) will be more interesting, driving us closer to danger, but it is difficult to imagine either party wanting blame for a 3 percent or more legislated pullback in economic activity.

So, the fiscal cliff is more than avoidable.

Fortunately, it is difficult to find a scenario that sends us over the fiscal cliff. Let's just hope our Washington leaders wear short sleeves.

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or SVB Asset Management, or any of its affiliates. This material, including without limitation the statistical information herein, is provided for informational purposes only. The material is based in part upon information from third-party sources that we believe to be reliable, but which has not been independently verified by us and, as such, we do not represent that the information is accurate or complete. The information should not be viewed as tax, investment, legal or other advice nor is it to be relied on in making an investment or other decisions. You should obtain relevant and specific professional advice before making any investment decision. Nothing relating to the material should be construed as a solicitation or offer, or recommendation, to acquire or dispose of any investment or to engage in any other transaction.

SVB Asset Management, a registered investment advisor, is a non-bank affiliate of Silicon Valley Bank and member of SVB Financial Group. Products offered by SVB Asset Management are not FDIC insured, are not deposits or other obligations of Silicon Valley Bank, and may lose value.

The views expressed in this column are solely those of the author and do not reflect the views of SVB Financial Group, or Silicon Valley Bank, or any of its affiliates.

In the classic "Rebel Without a Cause," our teenage hero agrees to a "chickie run" where he and Buzz the bully race toward a cliff in stolen cars to see who will bail out last. Unfortunately for Buzz, an entanglement of his jacket sleeve on the car door ends his short, tyrannical life.

A similar drama is playing out today in Washington as the U.S. economy speeds toward the "fiscal cliff" that could be reached on New Year's Day. As revelers awake to face lucky '13, they may find:

Bush and payroll tax cut expirationsDramatic healthcare tax increasesSizable spending cuts from the failed "Super Committee"Ending of extended unemployment benefitsTaken together, there will be $500 - 700 billion in fiscal contraction - or about 3 to 5 percent of GDP. Considering the economy continues to teeter, a 5 percent adjustment feels like a cliff, indeed.

Republicans and democrats have created this cliff through prior legislative bargains, forcing a showdown of sorts heading into the election...Read More